Mr. Masembe Kanyerezi appearing with Mr. Karamagi Kabito for the applicant submitted that the respondent company is indebted to the applicant bank but there is a dispute as to quantum of that debt. The applicant
has instituted winding-up proceedings against the respondent vide company cause No. 16 of 2005 in the High Court, Commercial Division
in relation to that debt. The court has already made an order whereby an interim liquidator was appointed. In his view, the High
Court Civil Suit No. 272 of 2003 and the present Civil Appeal No. 45 of 2005 both of which are sill pending in the High Court and
the Court of Appeal respectively, should be stayed pending, the outcome of winding-up petition in the Commercial Division of the
High Court. In support of his argument, counsel relied on the provisions of sections 226, 231 of the Companies Act and the decision
in Re Tweeds Garages Ltd  1 ch Divison 406 and Re Welsh Brick Industries Ltd  2 ALLER 197. It seems to counsel that it would be quite unjust to refuse this application merely because there is a dispute pending in the High
Court or an appeal pending in this court. According to counsel, all these matters will be addressed during the winding-up proceedings.
Therefore, these proceedings should be stayed.
Mr. Barnabas Tumusingize, learned counsel for the respondent did not agree. He submitted that the current respondent and the applicant
and the report of auditors bound the parties. In its written statement of defence, the applicant admits the consolidation of accounts.
Mr. Willie Ogule, the Corporation Secretary of the applicant, also admitted that there had been consolidation of accounts (see paragraph
4 of his affidavit).
The application to amend the defence to remove admission of consolidation was rejected by Lugayizi, J. It is upon that rejection
that prompted the applicant to lodge Civil Appeal No. 45 of 2005 in this court. As the appeal awaits hearing, the applicant files
winding-up proceedings. According to counsel, it is not in the interest of justice for the appeal here or the suit in the High Court
to be stayed. He also pointed out that in the winding-up proceedings, more money is being asked for than what was admitted in the
Learned counsel further submitted that it is not mandatory upon this court to make an order for stay of proceedings. In support of
this argument, counsel relied on the decision of Re David Lloyd & Co  6Chd 340 where it was held, interalia, that an application for stay of proceedings is not automatic. He also pointed out that section 226
of the Companies Act upon which this application is brought, the word “may” is used for a stay upon considering the circumstances of the case. The application is not brought under section 231 of the Act as
counsel for the applicant would like this court to invoke on the matter.
Mr. Tumusingize wondered why rule 1 (3) of the Rules of this Court is being applied to this application! He submitted that this Court
should use its inherent power to restrain the applicant which has unfinished proceedings in this Court and in the High Court from
prosecuting its winding-up petition because that is an abuse of court process.
Turning to Re Welsh Brick Industries Ltd (supra), counsel submitted that this case is distinguishable from the present case. In that case, the company was insolvent but that
is not the case here. In Re Tweeds Garage Ltd (supra), counsel also pointed out that the company was insolvent and failed to pay debts and these were the considerations. In the
present case, the respondent is willing to pay its debt except it wants to know the precise amount it owes the applicant and that
is what the High Court must resolve. Mr. Tumisingize submitted, therefore, that it was improper for the applicant who filed an appeal
here and before prosecuting it, to persue winding-up proceedings. In counsel’s view, endless litigation will make the respondent
incur insurmountable costs for nothing. The application lacks merit and should be dismissed with costs to the respondent.
In his reply, Mr. Kanyerezi pointed out that the auditor’s report is unequivocal in that the two reports were inconsistent
and that was why the applicant rejected the same. The applicant then engaged another firm of auditors in the names of Price Water
Cooper whose report is agreeable to the applicant. He further stated that this application is neither an abuse of Court process nor
is it trying to avoid the appeal here or the High Court proceedings. This court has discretion to stay these proceedings under section
226 of the Companies Act. However, under section 231 of the Companies Act, an order for stay is mandatory except by leave of court.
As there is no abuse of court process, counsel submitted the applicant wants an orderly conduct of the case.
Mr. Musingizi in reply argued that the application is under section 226 of the Companies Act and not section 231 of the Act. It is within the power of this court to consider the circumstances of the case. He further pointed out that Price Water Cooper was
never appointed by court and the respondent never made any representation. Price Water Cooper were auditors of the applicant at the
time. Bahemuka, Johnson, Nyende & Co was appointed by the court and counsel for both parties made representations and bound themselves
with the report made by that firm. The matters raised by both parties on 18/9/2003 regarding the 1st report brought about the 2nd report and that explains why there was variance.
This application is brought under section 226 of the Companies Act, which states:
“226. Power to stay or restrain proceedings against a company.
At any time after the presentation of a winding-up order has been made, the company or any creditor or contributory, may –
where any suit or proceeding against the company is pending in the High Court or Court of Appeal apply to the court in which the suit
or proceeding is pending for a stay of proceedings therein;
Where any other suit or proceeding is pending against the company, apply to the court having jurisdiction to wind up the company to
restrain further proceedings in the suit or proceeding, and the court to which application is so made may, as the case may be, stay
or restrain the proceedings accordingly on such terms as it thinks fit.”
It is clear to us that the above provisions empower the High Court or the Court of Appeal to exercise its discretion to stay or restrain
the proceedings before it on such terms as Court thinks fit. It is not mandatory upon the High Court or the Court of Appeal to exercise
that power. The High Court or the Court of Appeal before exercising its discretion has to consider the circumstances of the case.
In the instant case, the respondent company is not insolvent. It is willing to pay its debt. The only missing factor is that the
respondent wants to know the level of its indebtedness to the applicant. The High Court in HCCS No. 272 of 2003 must be given a chance
to resolve this scenario by investigating the matter.
Further, the applicant has instituted Civil Appeal No. 45 of 2005 before this Court and this appeal is still pending. The appeal
is against the refusal by the High Court to allow the applicant to amend its written statement of defence against admission that
the respondent had consolidated its accounts with the applicant bank. It seems from the pleadings that if the accounts were consolidated
that would reduce the level of indebtedness but if not consolidated, indebtedness would be high. In our view, the High Court must
investigate that scenario. As regards the appeal pending before this Court, it is up to the applicant/appellant either to prosecute
or withdraw it. We are uncomfortable to stay the proceedings, as that would increase backlog of cases in this Court.
In his submission, Mr. Kanyerezi asked this Court to invoke the provisions of section 231 of the Companies Act. We are unable to
do so on the ground that the application is not on the basis of that section of the Act. In any case the applicant has not sought
leave of Court.
All in all, the circumstances of this case are that both HCCS No. 272 of 2003 and Civil Appeal No. 45 of 2005 are still pending.
Before they are disposed of, the applicant has instituted winding-up proceedings in the Commercial Division of the High Court and
the same is also pending. This kind of endless litigation, in our view, is an abuse of court process. The applicant must be firm
on what to do and do it in an orderly manner in the interest of justice. We are, therefore, unable to make an order for stay of the
proceedings both in HCCS No. 272 of 2003 and Civil Appeal No. 45 of 2005.
In the result, this application lacks merit and it is dismissed with costs to the respondent.
Dated at Kampala this ……18th ………day of …………January……………2005.